Analysts have been cutting estimates for Google (GOOG) all quarter, and the Q1 estimates are now low enough that the company should beat them when it reports results on Thursday. We think most analysts are still too optimistic about the rest of the year, but even those estimates are coming down.
Here’s Ross Sandler of RBC on Q1:
Our 1Q09 RBC/SearchIgnite study highlights the following key trends:
1) paid search decelerated materially in 1Q09, with overall spend at SI down 2% Y/Y (vs. up 22% Y/Y in 4Q08);
2) linearity in the quarter was back-end-weighted, with January spend down 14% Y/Y,
February down 1% and March up 11%;
3) conversion rates declining–consumers spent 32% more time between click and conversion than a year ago, and multiple clicks on the same ad increased 28% Y/Y; and
4) Google continues to gain wallet share, controlling 74% of total spend in 1Q09, up from 70% in 1Q08, at the expense of Yahoo/MSN. Based on recent channel checks, we believe SearchIgnite is performing in line with broader US-based SEMs in terms of Y/Y growth.
These findings support our thesis: 1) GOOG continues to gain share; 2) paid search
is not immune to a slowdown, as evidenced by decelerating spending growth and increasing time-to-conversion; and 3) paid search remains one of the most effective forms of advertising and should continue to gain share from other media types in a difficult advertising economy, even if overall budgets are contracting.
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